A co-founder agreement does two jobs. Before incorporation, it records what the founders agreed: who owns what, who does what, and what happens if someone leaves. After incorporation, most of its clauses get replaced by formal company documents. Founders who understand that second job write a better first draft, because they know where each promise has to end up.
This is general information, not legal or tax advice. The template below is a starting point for a conversation with counsel, not a substitute for the stock purchase agreements, IP assignments and board consents a corporation needs.
Where each clause ends up
| Clause in the founder agreement | Becomes, after incorporation |
|---|---|
| Equity split | Number of shares in each founder’s stock purchase agreement |
| Vesting | Repurchase right in the restricted stock purchase agreement |
| IP | Each founder’s IP assignment agreement |
| Roles and titles | Officer appointments in the board consent |
| Board seats | Board composition in the bylaws and initial consent |
| Decision-making | Board and stockholder approval rules under the charter, bylaws and Delaware law |
| Departure | Repurchase right, plus any separation agreement |
| Confidentiality | IP and confidentiality agreement |
The how to start a startup company guide lists those formation documents in order. The point of the table: nothing in the founder agreement should contradict what the company documents will say. If the founder agreement promises acceleration on a sale and the stock purchase agreement does not include it, the stock purchase agreement is what binds the company.
The template
The template below is written for a two-founder company that intends to form, or has formed, a Delaware C corporation. Bracketed text gets filled in.
CO-FOUNDER AGREEMENT
1. Parties
This agreement is between [Founder A] and [Founder B] (the "Founders"),
dated [date].
2. The company
The Founders intend to form [Company name], a Delaware corporation
(the "Company"), to build [one-sentence description]. Until the Company
is formed, this agreement records the Founders' understanding.
3. Equity
On formation, the Company will issue common stock as follows:
[Founder A]: [number] shares ([__]%)
[Founder B]: [number] shares ([__]%)
Each Founder will pay fair market value for the shares at issuance.
4. Vesting
Each Founder's shares will vest over [48] months, with [25]% vesting
after [12] months of continuous service and the rest in equal monthly
installments. Unvested shares will be subject to repurchase by the
Company at the lower of cost or fair market value if the Founder's
service ends. [Vesting credit of [__] months for work before formation.]
Each Founder will file an 83(b) election within 30 days of issuance.
5. Acceleration
[None.] / [If the Company is acquired and the Founder is terminated
without cause within [12] months afterward, [__]% of unvested shares
will vest.]
6. Intellectual property
Each Founder assigns to the Company all rights in work product related
to the Company's business, including work created before formation,
and will sign the Company's IP assignment agreement at issuance. Each
Founder confirms that no current or former employer has a claim to
that work, except as listed here: [list or "none"].
7. Roles
[Founder A]: Chief Executive Officer, responsible for [areas].
[Founder B]: Chief Technology Officer, responsible for [areas].
Roles may change by board decision.
8. Time commitment
Each Founder will work full time on the Company starting [date].
[Exceptions: ...]
9. Board and decisions
The initial board will be [Founder A and Founder B]. Decisions
outside the ordinary course (raising money, issuing equity, hiring
executives, taking on debt over $[__], selling the Company) require
approval of [both Founders / the board].
10. Compensation
Neither Founder will draw salary until [event or date]. Salary
changes require board approval.
11. Departure
If a Founder leaves, the Company may repurchase unvested shares under
Section 4. Vested shares stay with the departing Founder. The
departing Founder will return Company property and keep Company
information confidential.
12. Confidentiality
Each Founder will keep the Company's non-public information
confidential during and after their service.
13. Disputes
The Founders will try to resolve disagreements by discussion for
[30] days, then by [mediation / arbitration] in [location].
14. Replacement by formal documents
Once the Company issues stock, the Company's charter, bylaws, stock
purchase agreements and IP agreements control. The Founders will
sign documents consistent with this agreement.
Signed: ____________ [Founder A] ____________ [Founder B]
Notes on the clauses that cause fights
Equity (clause 3)
The number of shares matters less than the percentages, but use real numbers so the agreement maps directly onto the stock purchase agreements. Y Combinator partner Michael Seibel’s essay on splitting equity argues for equal splits. Whatever the split, write down the reasoning in one line. Investors ask.
Vesting (clause 4)
The four-year, one-year-cliff schedule in the template mirrors what YC’s essay calls a typical setup in the Valley. Vesting protects the founder who stays. Without it, a founder who leaves in month three keeps their full stake, and the remaining founder works for years to build value for someone who left.
“Vesting credit” gives a founder credit for months already worked before formation. It is negotiable and should be written as a specific number of months.
The 83(b) line is in the template because missing it is expensive. IRS instructions for Form 15620 require the election no later than 30 days after the date the property was transferred.
Acceleration (clause 5)
Single-trigger acceleration vests shares on a sale alone. Double-trigger acceleration requires a sale and a termination. Acquirers price in any acceleration, so founders should agree on it now with the trade-off in mind. Leaving it blank is a choice too.
IP (clause 6)
This is the clause investors read hardest. The confirmation about former employers matters most for a technical founder who wrote early code while employed elsewhere. If there is any doubt, list it and get a lawyer’s view before the company is formed. The guide on how to find a technical cofounder covers trial projects and why IP assignment comes before the first commit.
Decisions (clause 9)
Two founders on a two-person board can deadlock. The template’s approval list keeps the founders from surprising each other on the big decisions. It does not solve deadlock. Some teams give the CEO the tie-break on operating questions and keep equity and sale decisions joint. YC’s essay also suggests that only the CEO hold a board seat before a significant equity raise. Pick one approach and write it down.
Departure (clause 11)
The template uses the lower of cost or fair market value for unvested shares, which means a departing founder gets back roughly what they paid for unvested stock. Some agreements add “good leaver” and “bad leaver” terms. These add negotiation and can be hard to apply when the facts are disputed.
What the template leaves out
- Non-competes. Enforceability varies by state and changes over time. Ask counsel in the state where the founders work.
- Entity choice. The template assumes a Delaware C corporation. The reasons are covered in Delaware C corp vs LLC.
- Investor terms. Nothing here binds a future investor. A seed or Series A investor may ask founders to re-vest part of their stock. A clean founder agreement makes that conversation shorter.
If the company already exists
Founders who incorporated first and talked later need a different fix. There is no need for a pre-formation agreement, because the corporation’s documents already govern. The work is an audit:
- Pull each founder’s stock purchase agreement and check that the share numbers match the cap table.
- Confirm the vesting terms and repurchase price are what the founders believe they are.
- Confirm each founder signed an IP assignment, and that it covers work done before the company was formed.
- Confirm each founder’s 83(b) election was filed, and that the company has a copy.
Anything that does not match gets fixed by board consent and amended agreements. A short memo signed by both founders can still record the softer terms the documents do not cover: roles, time commitment, how deadlock gets broken.
Before signing
- Each founder reads every clause aloud with the other present. Disagreements surface faster that way than over email.
- Fill in every bracket. A blank is an argument postponed.
- Have a lawyer convert the agreement into the formation documents within weeks, not months.
- Calendar the 83(b) deadline the day stock is issued.